The Other Oil Crisis

Plus: Did someone pull a fast one on JP Morgan Chase? ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌ ‌

January 13, 2023

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TOGETHER WITH

Good morning.

It’s less of a haircut and more of an iTrim.

In a show of solidarity, Apple CEO Tim Cook will take a 40% salary reduction this year to get more in line with a shrinking share price and perhaps offset some vocal criticism that the boss man’s salary was taking too big a bite out of the tech giant’s P&L. But before you start worrying about how Cook will make ends meet, bear in mind that his compensation will drop from $99 million to $49 million. The real question is: How will he tell the gardener(s)?

Morning Brief

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Nelson Peltz has his next big target.

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Did JPMorgan get duped?

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Never pour palm oil on troubled waters.

Media

Disney Braces for a Proxy Fight with Nelson Peltz

(Photo credit: Chris Harrison/Flickr)

Just call him Cruella de Peltz.

Even with Bob Iger back in the CEO chair and the splashy scoop of Nike executive chairman Mark Parker to serve as Disney’s new board chair, legendary activist investor Nelson Peltz and his asset management firm Trian Partners still see the need to launch an activist campaign to “Restore the Magic” of the Magic Kingdom.

The Circle of Business Life

Ironically enough, Iger came to Disney power in 2004 when a similar “Save Disney” campaign, albeit launched by one of Walt’s heirs, resulted in the resignation of then-head honcho Michael Eisner. Iger’s subsequent 15-year reign was headlined by much-heralded acquisitions of blockbuster intellectual properties, including Pixar, Marvel, and Lucasfilm/Star Wars, as well as launching Disney feet-first into the streaming era. But that “spend, spend, spend” mindset culminated in the titanic $71 billion acquisition of 21st Century Fox in 2019 — a move Peltz claimed in a CNBC interview on Thursday turned Disney’s “once-pristine balance sheet into a mess” and cost the company $50 billion. Meanwhile, streaming has led to a torrent of losses.

While Iger has already promised cost-cutting in his second CEO stint, it’s apparently not enough for Peltz and Trian, who have accumulated roughly $900 million in Disney stock, according to The Wall Street Journal. The activists come armed with a list of demands — as well as plenty of evidence for shareholders that Disney’s top brass require strategic intervention:

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While Trian isn’t asking for the replacement of Iger, they insist the board construct a suitable 2-year succession plan to avoid another Chapek-shaped disaster (already one of Iger’s stated goals upon his return). Meanwhile, they’re demanding Disney either acquire the outstanding 33% Hulu ownership stake from Comcast or ditch the streamer altogether (Peltz is not calling for the spinoff of ESPN, à la Dan Loeb’s unsuccessful activist campaign last year).

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Disney’s market value — around $175 billion — sits at a half-decade low, a period in which its stock underperformed the S&P 500. Meanwhile, the still-rebounding parks business is showing weakness in the face of a possible recession.

Still (Lion) Kings: While Disney may not be in tip-top shape, Peltz would be hard-pressed to argue it is underperforming relative to its biggest rivals. Netflix’s stock is down a similar 36% in the past 12 months, while Paramount Global’s is down 45% and the newly formed Warner-Discovery is off 50%. Hey Nelson Peltz, can we introduce you to the phrase Hakuna Matata?

– Brian Boyle

Banking

JPMorgan Chase Shuts Down Fintech Website, Says Founder Lied About Size of Customer Base

It looks like Jamie Dimon’s famous fear of fintech has gotten the best of him.

On Thursday, JPMorgan Chase shuttered Frank, a financial aid planning platform for college students, and sued the company’s founder for grossly misrepresenting its customer base by loading it with millions of fake accounts. You might be asking why someone would have the temerity to scam the biggest bank in America, but the real question might be how did JPMorgan CEO Dimon, a.k.a. “America’s Banker,” and his team let themselves get flim-flammed?

Broken and Busted

JPMorgan acquired Frank and its creator Charlie Javice for $175 million in 2021. Javice boasted that her site was the “fastest-growing college financial planning platform” used by more than five million students at 6,000 schools. That presented a tempting line into a vein of young blood — that is, potential clients for the megabank, if any of them had actually been Frank users.

After sending out marketing emails to 400,000 Frank customers, 70% bounced back, which is a pretty low hit rate (and we say this as a newsletter). Now JPMorgan alleges Javice and another executive Olivier Amar created nearly 4 million fake accounts. While one has to tip their hat to Javice’s “entrepreneurship,” they might also want to ask if JPMorgan could use some help with due diligence:

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Fintech has more scattered regulations than traditional banks and because of new advancements in technology, firms also have plenty of growth potential. By contrast, banks have limited market distribution, which Dimon has publicly admitted he finds existentially terrifying. That fintech paranoia may have played a role in the bank’s decision to purchase Frank.

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In recent years, JPMorgan has been buying up companies like OpenInvest and Global Shares and investing millions into data groups Kraft Analytics and MioTech to stave off fintech competition. Dimon has also been plowing money into proprietary tech development for a decade. This past December, the bank paid $800 million to acquire a 48.5% stake in the Athens-based payment platform Viva Wallet.

“Banks are facing extensive competition from Silicon Valley, both in the form of fintechs and Big Tech companies,” Dimon told shareholders in 2021.

I’m Tellin’: In other JPMorgan legal news, the bank is asking the courts to keep a former employee from poaching its customers. A complaint alleges, Joseph Michael, who worked for JPMorgan for more than 18 years, breached a contract after he left the company in December and got 32 former clients with assets totaling $28 million to transfer their accounts to his new place of work. Just because Jaime’s paranoid doesn’t mean no one is raiding his staff.

– Griffin Kelly

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Trade

Malaysia Escalates Standoff With EU Over Palm Oil

What is the sound of a tortilla chip not crunching? Europeans may soon find out the hard way.

Malaysia’s deputy prime minister Fadillah Yusof squared up to the EU on Thursday over a new law that would ban the sale of palm oil unless suppliers can prove they haven’t contributed to deforestation. In response, Yusof floated the possibility of cutting Europe off from the world’s most popular oil, which not only gives chips their crunch but is found in roughly half of everything in a supermarket.

Greasy Palms

Sadly global demand for the versatile oil has led to mass deforestation, with Malaysia losing 47% of its natural forests between 1972 and 2015.

When the EU drew up its new law, Malaysia and Indonesia —the world’s two biggest exporters— filed a complaint with the World Trade Organization, claiming the move was discriminatory. This is not the first time Malaysia has come out swinging to defend palm oil:

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When the EU mooted banning palm oil from biofuels in 2018, a Malaysian minister called the initiative “crop apartheid,” adding: “Don’t expect us to continue buying European products.” No anti-EU embargo materialized, but the EU’s target year for phasing out palm oil biofuel isn’t until 2030.

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This isn’t the first time going green has landed Europe in a spat. Last month a new carbon emissions tax raised hackles from trade partners including the US and China.

Yeast of Eden: Scientists searching for a viable palm oil substitute believe microbial oils, i.e. oils put out by microscopic organisms such as yeast and algae, could provide the answer. Microbial oil factories were set up in Germany during WWI, but the practice subsequently fell into obscurity. “The technology is actually very old but was never really established in industry, and I always wondered why because it has great potential,” biotechnologist Philipp Arbter told National Geographic. Yeast oil could give the seemingly infinite number of craft breweries a nice side hustle…

– Isobel Asher Hamilton

Extra Upside

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Bold Strategy, Cotton: SBF launched a newsletter to plead his innocence.

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Woo Hoo! US inflation slowed for the sixth straight month.

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